ATTACHMENT E

THE PROPOSED DECISION

ATTACHMENT E

BEFORE THE

BOARD OF ADMINISTRATION

CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM

STATE OF CALIFORNIA

In the Matter of the Appeal of Death BenefitsPayable Upon the Death of David Duran by:

CHANE D. BILLOW,

CHASE C. BILIX)W,

and

JESSICA CRANE,

Respondent,

Respondent,

Respondent.

Case No. 2015-1132

OAH No. 2016010771

PROPOSED DECISION

This matter was heard before Karen J. Brandt, Administrative Law Judge, Office ofAdministrative Hearings, State of California, on July 28 and August 12, 2016, inSacramento, California.

James C. Paul, Attorney at Law, represented the California Public Employees'Retirement System (CalPERS).

J, David Horspool, Attorney at Law, represented respondent Chane D. Billow(respondent Chane).

Jeff Grotke, Attorney at Law, represented re.spondent Jessica Crane (respondentJessica).

Respondent Chase C. Billow (respondent Chase) represented himself.

Evidence was received On July 28 and August 12,2016. The record remained open toallow the parties to submit closing briefs. On September 7,2016, respondent Jessicasubmitted a closing brief, which was marked for identification as Exhibit R-35. On

CALIFORNIA PUBLIC EMPLOYEES'

RETIREMENT SYSTEMmLEDlggot•^Jij n

September 9,2016, respondent Chane and CalPERS submitted closing briefs, which weremarked for identification as Exhibits R-36 and C-20, respectively. On September 12, 2016,respondent Jessica submitted a reply brief, which was marked for identification as Exhibit R-37. On September 23,2016, respondent Chane submitted a reply brief, which was markedfor identification as Exhibit R-38.' The record was closed, and the matter was submitted fordecision on September 23,2016.

ISSUE

Did CalPERS correctly determine that respondent Je.ssica was entitled to receive thelump sum Option 1 Balance of Contributions Benefit (Option 1 Balance Benefit) andProrated Allowance Payment upon the death of her uncle, David Duran?"

FACTUAL FINDINGS

1. David Duran was employed by the Employment Development Department asa Criminal Investigator. By reason of his employment, Mr. Duran was classified as a statesafety member of CalPERS. Mr. Duran was not married and did not have any children.Respondent Jessica was Mr. Duran's niece. Her mother Elizabeth was Mr. Duran's sister.

2. Respondents Chase and Chane are brothers. They were not related by blood toMr. Duran. They and their family were friends with Mr. Duran. Although they were notrelated by blood, respondents Chase and Chane ealled Mr. Duran "uncle."

Mr. Duran's Retirement Application, Beneficiary Designations and Special Powers ofAttorney

3. On September 5,2013, CalPERS received a Service Retirement ElectionApplication (Application) signed by Mr. Duran. Handwritten at the top of the Applicationwas "Emergency Retirement." In his Application, Mr. Duran designated his last day on thepayroll as October 31,2013, and the effective date of his retirement as November 1^ 2013.Mr. Duran elected an Option 1 Allowance. He designated respondent Chase as thebeneficiary of the Option 1 Balance Benefit. He designated respondent Jessica as thebeneficiary of the Lump Sum Retired Death Benefit. On September 20,2013, CalPERS alsoreceived a Special Power of Attorney (September 2013 Special Power of Attorney) signed by

' Respondent Chase did not submit any post-hearing briefs. CalPERS did not submita reply brief.

^ At the hearing, both respondents Chase and Chane argued that respondent Chanewas the proper beneficiary of the Option 1 Balance Benefit and Prorated AllowancePayment.

Mr. Duran, which designated Gloria Barnett, his sister and respondent Jessica's aunt, as hisAttorney-In-Fact.

4. On February 20,2014, CalPERS received a Post Retirement Lump SumBeneficiary Designation (February 2014 Beneficiary Designation) signed by Mr. Duran,which designated respondent Chane as Mr. Duran's beneficiary of the Option 1 BalanceBenefit.

5. On March 6,2014, CalPERS received another Post Retirement Lump SumBeneficiary Designation (March 2014 Beneficiary Designation) for Mr. Duran. The March2014 Beneficiary Designation designated respondent Jessica as the beneficiary of the Option1 Balance Benefit. On (he signature line of the March 2014 Beneficiary Designation was an"X." Attached to the March 2014 Beneficiary Designation was a notary publicacknowledgement, signed by Lisa Ol.son, a notary public, which acknowledged that onMarch 5, 2014, Mr. Duran personally appeared before Ms. Olson and proved to her "on thebasis of satisfactory evidence" that he was the person who executed the instrument.

6. On March 6, 2014, CalPERS also received a Special Power of Attorney(March 2014 Special Power of Attorney) for Mr. Duran, which designated respondent Jessicaas Is^r. Duran's Attorney-ln-Fact. The March 2014 Special Power of Attorney appears tohave been partially signed by Mr. Duran. Attached to the March 2014 Special Power ofAttorney was a notary public acknowledgement signed by Ms. Olson. The notary publicacknowledgement stated that Mr. Duran and respondent Jessica personally appeared beforeMs. Olson and proved on the "basis of satisfactory evidence" that they were the persons whoexecuted the instrument.

7. Mr. Duran died on March 11,2014. As set forth in the death certificate, theimmediate cause of Mr. Duran's death was "malignant mesothelioma right chest." Othersignificant conditions contributing to Mr. Duran's death were "hypertension, hyperlipidemia,coronary artery disease." Mr. Duran was 59 years old when he died.

8. Death benefits payable upon Mr. Duran's death consisted of: (1) a lump sumOption 1 Balance Benefit of $109,699.91; (2) a Retired Death Benefit of $2,000; and (3) aProrated Allowance Payment of $1,375.94. Because respondent Jessica was at all relevanttimes designated by Mr. Duran as the beneficiary of the Lump Sum Retired Death Benefit,CalPERS determined that the $2,000 Retired Death Benefit was payable to her. As set forthbelow, CalPERS also determined that respondent Jessica was entitled to the lump sumOption 1 Balance Benefit of $109,699.91 and the Prorated Allowance Payment of $1,375.94because she was designated as the beneficiary on the March 2014 Beneficiary Designation.Respondents Chase and Chane disputed CalPERS' determination with regard to the Option 1Balance Benefit and Prorated Allowance Payment.

Review by CalPERS

9. In May 2014, CalPERS received a letter from respondents Chase and Chane,who asserted that respondent Jessica "by way of fraud and/or undue influence, unlawfullymade herself the Beneficiary of David Duran's CalPERS death benefits." RespondentsChase and Chane also asserted that, "At least one week prior to the final Beneficiary change,David Duran was no longer able to manage his own financial or legal affairs, being acutelyaffected in body and mind by pain-management narcotics and other medications during hisfinal in-home hospice care." Respondents Chase and Chane asserted further that: (1)respondent Jessica kept the beneficiary change hidden; (2) she had a "personal relationship"with notary public Lisa Olson; and (3) during the two weeks before his death, Mr. Duran"was either physically or mentally unable or not allowed to communicate with loved ones hehad been in contact with every day up to that point." In their letter, respondents Chase andChane included text messages from and to respondent Jessica.

10. Daniel Schofield is employed by CalPERS as a Retirement Program SpecialistII. After Mr. Duran's death, Mr. Schofield reviewed the May 2014 letter sent by respondentsChase and Chane. By letter dated September 18,2014, Mr. Schofield sought additionalinformation from respondent Chase, including a statement from Mr. Duran's treatingphysician "as to his cognitive state on March 5,2014," the day he signed the March 2014Beneficiary Designation.

11. On September 18,2014, Mr. Schofield also wrote to respondent Jessica. Inthis letter, Mr. Schofield stated that CalPERS had received a dispute to the validity of theMarch 2014 Beneficiary Designation. Given this dispute, CalPERS would "take intoconsideration the member's competency and understanding of signing such a document."Mr. Schofield asked respondent Jessica to provide information for CalPERS' consideration.

12. On July 7, 2015, CalPERS sent letters to respondents Chase and Chane,notifying them that CalPERS had determined that they were not entitled to any benefits as aresult of Mr. Duran's death. As the July 7,2015 letters explained,

On May 2,2014, we received a letter from [respondents Chaseand Chane]. In your letter you advised us that you believe thatMr. Duran was not mentally competent when he signed his PostRetirement Lump Sum Beneficiary Designation dated March 5,2014, You provided documentation in support of this claim.However, upon review of the documentation we found noinformation indicating Mr. Duran was not mentally competenton March 5, 2014. Therefore, on September 18, 2014, werequested that you provide a statement from Mr. Duran'streating physician regarding his mental capacity on March 5,2014. No statement has been received as of this date.

The July 7,2015 letters staled that, "absent proof otherwise, CalPERS must recognizeMr. Duran's Post Retirement Lump Sum Beneficiary Designation dated March 5,2014, as avalid beneficiary designation." The letters stated that respondent Jessica was deemed to bethe proper beneficiary of the Option 1 Balance Benefit in accordance with the March 2014Beneficiary Designation, and that the Prorated Allowance Payment was payable to her as theOption 1 beneficiary in accordance with Government Code section 21506. The lettersnotified respondents Chase and Chane of their rights to appeal from CalPERS'determination. Respondent Chane timely appealed from CalPERS' determination.

13. At the hearing, Mr. Schofield testified that respondents Chase and Chane didnot submit any documentation from a medical professional that opined that Mr. Duran wasnot competent to execute the March 2014 Beneficiary Designation because of cognitivedeficits. There was no information in the death certificate to indicate that Mr. Duran suffered

from Alzheimer's or dementia. The March 2014 Beneficiaiy Designation was signed in thepresence of a notary. Mr. Schofield is not an investigator. If re.spondents Chase and Chanebelieved that Mr. Duran was subjected to undue influence or elder abuse, they needed tosubmit findings from a court to that effect. According to Mr. Schofield, without a courtdetermination, CalPERS could not consider respondents Chase and Chane's claims of undueinfluence and fraud. Mr. Schofield also testified that he did not have the expertise tointerpret chart notes in Mr. Duran's medical records to determine Mr. Duran's competence toexecute the March 2014 Beneficiary Designation. An opinion of a medical expert wasrequired to make such a determination.

Respondents' Testimony and Other Evidence at Hearing

14. Respondents Chase, Chane and Jessica testified at the hearing. In addition,Robert Crane, respondent Jessica's husband, testified.

15. Mr. Duran had a close personal relationship with respondents Chase andChane and their family their entire lives.

16. Mr. Duran also had a close personal relationship with respondent Jessica, hisniece, her entire life. For more than one year before Mr. Duran died, he lived in respondentJessica's home in California with respondent Jessica, Mr. Crane and their young son. Mr.Duran moved into respondent Jessica's home in or about January 2013, after Mr. Duran'sown home was foreclosed upon. Mr. Duran did not pay for rent or food while he lived inrespondent Jessica's home. Respondent Jessica and Mr. Crane had lived in Mr. Duran'shome after Mr. Crane got out of the Marines. According to respondent Jessica, Mr. Cranehad a "special" relationship with Mr. Duran because they had both been in the Marines.

17. In or about August 2013, Mr. Duran was diagnosed with cancer. After thisdiagnosis, Mr. Duran continued to live with respondent Jessica and Mr. Crane. In or aboutFebruary 2014, Mr. Duran began receiving hospice care in respondent Jessica's home.Skilled nurses and other healthcare workers came to respondent Jessica's home to providehospice care to Mr. Duran. Respondent Jessica scheduled this care. Respondent Jessica, Mr.

Crane, and Mr. Duran's sisters, including respondent Jessica's mother, Elizabeth, assistedMr. Duran during this period.

IS. On February 12,2014, Mr. Duran and Henry Yeo, M.D., signed a PhysicianOrders for Life-Sustaining Treatment (POLST), which included a Do Not AttemptResuscitation (DNR) order. The POLST provided that the only medical intervention thatwould be provided to Mr. Duran would be comfort measures to relieve his pain andsuffering. The POLST provided further that Mr. Duran would not receive any artificialmeans of nutrition, including no feeding lubes.

19. In the beginning of 2014, respondent Chane was living in Florida. In or aboutJanuary 2014, Mr. Duran spoke to respondent Chane about de.signating him as hisbeneficiary. In or about the middle of February 2014, respondent Chane visited Mr. Duran inCalifornia and stayed at respondent Jessica's home. On February 20,2014, shortly afterrespondent Chane returned to his home in Florida, respondent Jessica took Mr. Duran to theregional office of CalPERS, where Mr. Duran submitted the February 2014 BeneficiaryDesignation designating respondent Chane as his Option 1 Balance Benefit beneficiary.

20. On February 23, 2014, shortly after Mr. Duran had returned from a hospitalvisit, respondent Chase and his mother Nancy went to respondent Jessica's home to visit Mr.Duran. When they arrived, several of Mr. Duran's relatives were there, including respondentJessica, Mr. Crane, Mr. Duran's mother, his sisters Elizabeth and Gloria, his brother Michael,and respondent Jessica's siblings. Respondent Chase and his mother took Mr. Duran to visitrespondent Chase's grandmother, When they returned to respondent Jessica's home, therewas an argument between Nancy, respondents Chase and Chane's mother, and Elizabeth,respondent Jessica's mother. After this argument, respondent Jessica refused to allow Nancyto visit Mr. Duran at respondent Jessica's home. Respondent Jessica did not refuse to allowrespondents Chane and Chane to visit. Respondent Chase testified that although no one evertold him that he could no longer visit Mr. Duran, he "felt very uncomfortable" and as if hewas "not welcome." Respondent Chase did not see or communicate with Mr. Duran afterthis time.

21. Respondent Jessica testified that on March 5, 2014, she spoke to Mr. Duranabout respondent Chane. At that time, respondent Chane was working as a stock broker inFlorida. Mr. Duran was "upset" because he had given respondent Chane money to learnhow to invest in the stock market, and respondent Chane had gotten "greedy" and "lost" itall. Mr. Duran told respondent Jessica that respondent Chane had lost $10,000. Mr. Duranstated further that he was going to change his beneficiary to be respondent Jessica becauserespondent Chane was "irresponsible" with money. Mr. Duran told respondent Jessica to gointo his room and get the CalPERS' paperwork from his drawer. He also asked for hisreading glasses. Because Mr. Duran's hands were shaking, respondent Jessica called amobile notary to come to her home to acknowledge Mr. Duran's signature. RespondentJessica filled out the March 2014 Beneficiary Designation, except for the checked boxes onthe form, which Mr. Duran checked himself. Respondent Jessica also filled out the March2014 Special Power of Attorney. The notary public read the forms out loud to Mr. Duran.

Mr. Duran was worried about signing the forms because his hand was shaking. The notarypublic explained that it did not matter what he put on the signature line so long as the notarypublic saw that it was Mr. Duran doing it. The notary public witnessed Mr. Duran sign an"X" on the March 2014 Beneficiary Designation. Respondent Jessica and Mr. Crane alsowitnessed Mr. Duran signing his "X."

22. Mr. Duran was a member of the Church of Jesus Christ of Latter Day Saints,also known as the Mormon Church. At some point in his past, he had been excommunicated.Before he died, he sought to be rebaplizcd in the church. On March 4,2014, Mr. Crane tookMr. Duran to the Mormon Church, where he met with a council of about 20 to 30 men, whointerviewed him to determine whether he met the criteria for rebaptism. On March 6, 2014,Mr. Crane look Mr. Duran back to the church to be rebaptized. While in the church, Mr.Duran was asked questions about his beliefs and return to the church. From Mr. Crane'sobservations, Mr. Duran understood the questions and was able to respond. With assistance,Mr. Duran walked into the baptismal font, submerged himself, and was rebaptized. Mr.Duran's rebaptism occuiTed the day after the March 2014 Beneficiary Designation wasexecuted.

23. At the hearing, respondent Chane denied that Mr. Duran had given him$10,000, which he lost. Instead, he asserted that Mr. Duran gave him about $1,700 over timeto invest in the stock market to learn how to be a stock broker. According to respondentChane, the $1,700 was a gift that he was not expected to pay back.

24. Respondents Chase and Chane offered into evidence an excerpt from a March3,2014 text message from respondent Jessica to their mother Nancy, which they assertedshowed that respondent Jessica was trying to prevent them and their family from visiting Mr.Duran during the days before his death. That text message, in relevant part, stated:"Regarding your questions earlier only family can visit he doesn't recognize many peopleanymore." Respondents Chase and Chane also offered text messages between respondentJessica and respondent Chane about respondent Chane's helping to pay for Mr. Duran'sfuneral expenses. These text messages indicated that respondent Jessica was also going toask respondent Chase and his brother Chad "to chip in."

25. Respondent Chane offered into evidence copies of Skilled Nurse Visit andProgress Notes and other medical records. These notes and records were admitted asadministrative hearsay, and have been considered to the extent permitted under GovemmentCode section 11513, subdivision (d).'^

Government Code section 11513, subdivision (d), in relevant part, provides:

Hearsay evidence may be used for the purpose of supplementingor explaining other evidence but over timely objection shall notbe sufficient in itself to support a finding unless it would beadmissible over objection in civil actions.

Respondent Chane's Arguments

26. In his post-hearing briefs, respondent Chane argued that: (1) respondentJessica obtained Mr. Duran's mark on the March 2014 Beneficiary Designation by undueinfluence; and (2) the March 2014 Beneficiary Designation was not validly executed underCivil Code section 14, so it is of no force and effect.

27, Undue Influence Argument. Respondent Chane argued that the standard ofproof when undue influence is alleged is "preponderance of the evidence," and that theburden of proof is on the "party asserting the position." Respondent Chane also argued thatthe burden was on him to prove the elements of undue influence, and that, once he did so, theburden shifted to respondent Jessica to prove that Mr. Duran's execution of the March 2014Beneficiary Designation was not the result of undue influence. Respondent Chane pointed toWelfare and Institutions Code section 15610.70 as the statute that sets forth the elements of

undue influence applicable in this matter. According to respondent Chane, when theelements set forth in Welfare and Institutions Code section 15610.70 are applied, he met hisburden of creating a presumption that the execution of the March 2014 BeneficiaryDesignation was the result of undue influence on the part of respondent Jessica, so it thenbecame respondent Jessica's burden to prove by a preponderance of the evidence that theexecution of the March 2014 Beneficiary Designation was not the product of undueinfluence, which she failed to do. Welfare and Institutions Code section 15610.70 provides:

(a) "Undue influence" means excessive persuasion that causesanother person to act or refrain from acting by overcoming thatperson's free will and results in inequity. In determiningwhether a result was produced by undue influence, all of thefollowing shall be considered:

(1) The vulnerability of the victim. Evidence of vulnerabilitymay include, but is not limited to, incapacity, illness, disability,injury, age, education, impaired cognitive function, emotionaldistress, isolation, or dependency, and whether the influencerknew or should have known of the alleged victim'svulnerability.

(2) The influencer's apparent authority. Evidence of apparentauthority may include, but is not limited to, status as a fiduciary.

Respondent Chane argued that the Skilled Nurse Visit and Progress Notes should beadmitted as business records. (Evid. Code, § 1270 et seq.) Respondent Chane did not offer acertification or testimony from a custodian of records attesting to the notes' identity or modeof preparation, or any testimony or declarations from the healthcare providers who wrotethese notes. Consequently, respondent Chane failed to establish that there were anyexceptions to the hearsay rule that would allow these notes to be admitted into evidence otherthan as administrative hearsay under Government Code section 11513, subdivision (d).

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family member, care provider, health care professional, legalprofessional, spiritual adviser, expert, or other qualification.

(3) The actions or tactics used by the influencer. Evidence ofactions or tactics used may include, but is not limited to, all ofthe following:

(A) Controlling necessaries of life, medication, the victim'sinteractions with others, acce.ss to information, or sleep.

(B) Use of affection, intimidation, or coercion.

(C) Initiation of changes in personal or property rights, use ofhaste or secrecy in effecting those changes, effecting changes atinappropriate times and places, and claims of expertise ineffecting changes.

(4) The equity of the result. Evidence of the equity of the resultmay include, but is not limited to, the economic consequences tothe victim, any divergence from the victim's prior intent orcourse of conduct or dealing, the relationship of the valueconveyed to the value of any services or consideration received,or the appropriateness of the change in light of the length andnature of the relationship.

(b) Evidence of an inequitable result, without more, is notsufficient to prove undue influence.

28. Civil Code section 14 Argument. Respondent Chane argued that CalPERScould not accept the March 2014 Beneficiary Designation as valid because it was notexecuted in accordance with Civil Code section 14, which, in relevant part, provides:

Words used in this code in the present tense include the futureas well as the present;... signature or subscription includesmark, when the person cannot write, his name being writtennear it, by a person who writes his own name as a witness;provided, that when a signature is by mark it must in order thatthe same may be acknowledged or may serve as the signature toany sworn statement be witnessed by two persons who mustsubscribe their own names as witnesses thereto.

Discussion

Standard and Burden of Proof

29. This matter arose under the Public Employees' Retirement Law (PERL),Government Code section 20000 et seq. In accordance with Government Code section20134 of the PERL, the hearing in this matter was conducted under the AdministrativeProcedure Act (APA), Government Code section 11500 et seq. CalPERS initiated thisproceeding by filing a statement of issues pursuant to Government Code section 11504,which in relevant part, provides:

A hearing to determine whether a right, authority, license, orprivilege should be granted, i.ssued, or renewed shall be initiatedby filing a statement of issues. The statement of issues shall bea written statement specifying the statutes and rules with whichthe respondent must show compliance by producing proof at thehearing and, in addition, any particular matters that have cometo the attention of the initiating party and that would authorize adenial of the.agency action sought.

30. As the court explained in McCoy v. Board of Retirement (1986) 183Cal.App.3d 1044,1051, the applicable standard and burden of proof in this matter are asfollows:

As in ordinary civil actions, the party asserting the affirmative atan administrative hearing has the burden of proof, includingboth the initial burden of going forward and the burden ofpersuasion by a preponderance of the evidence.

31. In this case, CalPERS, after reviewing the submissions of the parties,determined that respondent Jessica was the proper beneficiary of Mr. Duran's Option 1Balance Benefit under the March 2014 Beneficiary Designation. In making thisdetermination, CalPERS, acting in its official capacity as a governmental agency, performedits official duty. As a result, CalPERS is entitled to the presumption that its official duty wasregularly performed. (Evid. Code, § 664.) Consequently, as set forth in McCoy, respondentsChase and Chane had the burden, including both the initial burden of going forward and theburden of persuasion, to prove by a preponderance of the evidence that CalPERS'determination should be overturned. As set forth below, respondents Chane and Chase failedto meet their burden of proof.

Undue Influence

32. Welfare and Institutions Code section 15610.70. As set forth above,respondent Chane argued that the elements of undue influence set forth in Welfare andInstitutions Code section 15610.70 should be applied in this case. Respondent Chane's

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argument was not persuasive. That section was enacted effective January 1,2014, as part ofthe Elder Abuse and Dependent Adult Civil Protection Act (Elder Abuse Act). TheLegislature stated its intent in enacting the Elder Abuse Act was as follows:

...it is the intent of the Legislature in enacting this chapter toprovide that adult protective services agencies, local long-termcare ombudsman programs, and local law enforcement agencies.shall receive referrals or complaints from public or privateagencies, from any mandated reporter submitting reportspursuant to Section 15630, or from any other source havingreasonable cau.se to know that the welfare of an elder or

dependent adult is endangered, and shall take any actionsconsidered necessary to protect the elder or dependent adult andcorrect the situation and ensure the individual's safety.

(Welf. & Inst. Code, § 15600, subd. (i).)

33. From this statement of legislative intent, there is no indication that theLegislature intended to make Welfare and Institutions Code section 15610.70 applicable toCalPERS' administrative proceedings involving the issues raised in this case. RespondentChane did not cite any law that would make the provisions of the Elder Abuse Act applicableto this proceeding. Consequently, respondent Chane failed to establish that Welfare andInstitutions Code section 15610.70 applies in this case.

34. Law Re: Undue Influence and Presumption. Courts have addressed the issueof undue influence in cases involving wills. The reasoning in these cases is instructive in thisproceeding. In In re Welch's Estate (1954) 43 Cal.2d 173,175-176, the court described theelements that must be established to prove undue influence as follows:

In an action to set aside a will of a deceased person on theground of undue influence, it is necessary to show that theinfluence was such as, in effect, to destroy the testator's freeagency and substitute for his own another person's will.[Citation.] Evidence must be produced that pressure wasbrought to bear directly upon the testamentary act. [Citation.]Mere general influence, however strong and controlling, notbrought to bear upon the testamentary act, is not enough; it mustbe influence used directly to procure the will, and must amountto coercion destroying free agency on the part of the testator.[Citation.] [M]ere opportunity to influence the mind of thetestator, even coupled with an interest or a motive to do so, isnot sufficient. [Citation.]

35. In Estate of Mann (1986) 184 Cal.App.3d 593,606, the court made clear thatto establish undue influence, "[tjhere must be proof of'"a pressure which overpowered the

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mind and bore down the volition of the testator at the very time the will was made.'"(Citations omitted.) But the court recognized that, "When a confidential relationship existsbetween the decedent and the beneficiary, and the beneficiary both actively participates inprocuring the execution of the will and unduly profits by it, a presumption of undue influencearises and places on the beneficiary the burden to show that the will was freely made."(Ibid.)

36. In Estate of Gelonese (1974) 36 Cal.App.3d 854, 861-862, the court elaboratedon the elements that must be proven to give rise to a presumption of undue influence asfollows:

In this state a presumption of undue influence arises when thereis a concurrence of the following elements: '(1) the existence ofa confidential or fiduciary relationship between the testator andthe person alleged to have exerted undue influence; (2) activeparticipation by such person in preparation or execution of thewill; and (3) an undue benefit to such person or another personunder the will thus procured.' [Citations.] All three of thesefactors must be present in order to have the benefit of thepresumption.

The court explained further that, "The presumption of undue influence, whenestablished, is a rebiittable presumption." {Estate of Gelonese, supra, 36 Cal.App.3d at p.862.)

37. With regard to the three elements giving rise to a presumption, respondentChane established that the second element existed: respondent Jessica actively participatedin the preparation and execution of the March 2014 Beneficiary Designation. All thehandwriting on the March 2014 Beneficiary Designation was hers, except for the checkedboxes and the "X," which Mr. Duran filled in. She obtained the services of a notary public tonotarize Mr. Duran's mark. Thus, respondent Chane established the second element for apresumption of undue influence to arise.

38. But respondent Chane did not establish the first and third elements necessaryto give rise to a presumption against respondent Jessica. With regard to the first element,respondent Chane did not establish that there was a confidential or fiduciary relationshipbetween respondent Jessica and Mr. Duran. In Estate of Gelonese, the court found there wasa confidential relationship between a parent and her children. In In re Welch's Estate, supra,43 Cal.2d at p. 516, the court found that there was no confidential or fiduciary relationshipbetween a brother and sister, concluding that, "Consanguinity of itself does not create afiduciary relationship." In Estate ofMann, a nephew conceded that'he had a confidentialrelationship with his aunt, so there was no reason for the court to make a determination onthis issue. From the reasoning set forth in these three cases, a confidential or fiduciaryrelationship does not automatically arise between a niece and an uncle due solely to theirblood relationship. Instead, sufficient facts must be proven to establish such a relationship.

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Even though Mr. Duran lived in respondent Jessica's home for the last year of his life, andshe coordinated his healthcare and assisted him with activities of daily living, there wasinsufficient evidence offered at hearing to establish that she had a conEdential or fiduciaryrelationship with Mr. Duran.

39. But even if it were found that a confidential or fiduciary relationship existedbetween respondent Jessica and Mr. Duran, respondent Chane did not establish the thirdelement necessary to give rise to a presumption against respondent Jessica: that she receivedan undue benefit from the March 2014 Beneficiary Designation, Of all three respondents inthis case, respondent Jessica was the most natural object of Mr. Duran's BeneficiaryDesignation; She was the only respondent who was Mr. Duran's blood relative. Mr. Duranlived in her home in California for the last year of his life, without paying for rent or food.She coordinated his healthcare, and assisted him with his daily living activities. In contrast,respondents Chane and Chase were not blood relatives. They lived outside California duringthe last year of Mr, Duran's life. Consequently, re.spondents Chase and Chane failed toestablish that respondent Jessica received an undue benefit from the March 2014 BeneficiaryDesignation.

40. In sum, respondent Chane failed to establish the three elements set forth inEstate of Gelonese to give rise to a presumption of undue influence against respondentJessica. Thus, the burden remained with respondents Chase and Chane to offer adequateevidence of undue influence to overturn CalPBRS' determination that respondent Jessica wasthe rightful recipient of Mr. Duran's Option 1 Balance Benefit. As set forth below, theevidence they offered at hearing was not adequate to meet this burden.

41. Mr. Duran's Health and Intention: Respondents Chase and Chane argued thatMr. Duran's declining health, as reflected in the Skilled Nurse Visit and Progress Notes andother medical records showed that Mr. Duran was too ill to knowingly and willingly executethe March 2014 Beneficiary Designation on March 5,2014. This argument was notpersuasive. Respondents Chase and Chane did not call any healthcare providers to testifyabout Mr. Duran's health during the last month of his life. While the progress notes andmedical records reflect that Mr. Duran health was declining during the last month of his life,they do not indicate that he had dementia, Alzheimer's or other cognitive deficits that wouldhave made him unable to voluntarily and knowingly change his Beneficiary Designationbefore he died. Respondents Chase and Chane did not offer any evidence from medicalexperts who opined that, when Mr. Duran made his mark on the March 2014 BeneficiaryDesignation, he did not have the cognition, competence or volition to voluntarily andknowingly change his beneficiary from respondent Chane to respondent Jessica. Thus,respondents Chase and Chane failed to provide adequate evidence to meet their burden ofproving that Mr. Duran's failing health made him unable to voluntarily and knowinglychange his beneficiary designation on March 5,2014.

42. Respondents Chane and Chase also argued that respondent Jessica isolated Mr.Duran during the last weeks of his life. This argument was not borne out by the evidence.While respondent Jessica may have sent a text telling respondents Chase and Chane's mother

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that non-family members were limited from visiting after March 3,2104, the evidenceshowed that Mr. Duran's extensive family and numerous healthcare workers regularlyattended to him during his final days.

43. Respondents Chase and Chane further argued that the circumstances of theexecution of the March 2014 Beneficiary Designation indicated that respondent Jessicaexerted her will over Mr. Duran to sign that document. The evidence did not support thisargument. During the days before and after Mr. Duran signed the March 2014 BeneficiaryDesignation, he met with the elders of his church, answered their questions, returned to hisfaith and was rebaptized. The determination he showed in doing so was a testament to thestrength of his intention and will during the last week of his life. If Mr. Duran had thedetermination, intention and strength of will to be rebaptized, it must be found that he alsohad the determination, intention and strength of will to execute the March 2014 BeneficiaryDesignation designating respondent Jessica as the recipient of his Option 1 Balance Benefit.

44. The evidence offered at hearing did not demonstrate that respondent Jessicaexercised such strong influence and undue pressure over Mr. Duran as to destroy his freeagency and substitute her will for his in an effort procure the March 2014 BeneficiaryDesignation. To the contrary, the evidence showed that Mr. Duran, at the time he executedthe March 2014 Beneficiary Designation, had the cognition, strength, volition anddetermination to do so of his own free will. In sum, respondents Chase and Chane failed tomeet their burden of establishing that respondent Jessica exercised undue influence over Mr.Duran to execute the March 2014 Beneficiary Designation on March 5,2014. Even if apresumption were found to arise against respondent Jessica, the evidence presented athearing was strong enough in her favor to rebut any such presumption and establish that sheis the proper recipient of Mr. Duran's Option 1 Balance Benefit.

Civil Code section 14

45. As set forth above, respondent Chane argued that the March 2014 BeneficiaryDesignation was not signed in accordance with Civil Code section 14, and consequently is ofno force and effect. Specifically, respondent Chane argued that because the March 2014Beneficiary Designation was not signed by two witnesses in addition to the notaryacknowledgement, it did not meet the requirements of Civil Code section 14 to be valid. Asset forth below, this argument was not persuasive.

46. Respondents Chase and Chane did not establish that the March 2014Beneficiary Designation was subject to the requirements of Civil Code section 14. Thatdesignation was on a form created by CalPERS. There is nothing on that form to indicatethat it must be executed in accordance with the requirements of Civil Code section 14. Thereare no instructions in the form's preprinted language that if a member is unable to sign hisname, he must have his mark both notarized and acknowledged in writing by two witnesses.

47. CalPERS determined that the notary public's acknowledgement of Mr.Duran's mark on the March 2014 Beneficiary Designation was sufficient, standing alone

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without additional witness signatures, to establish that its form was properly executed. Asset forth below, Government Code section 21490, subdivision (c), grants CalPERS theauthority to make the "conclusive determination" based upon "evidence satisfactory to it" ofwho is the proper beneficiary under a beneficiary designation. Given this clear and specificauthority vested in CalPERS under the PERL, CalPERS* determination that the March 2014Beneficiary Designation was properly executed by Mr. Duran must be found to beconclusive, notwithstanding any general provisions in Civil Code section 14 to the contrary.

48. But even if Civil Code section 14 were deemed to be applicable in thisproceeding, courts interpreting that section have not required strict compliance with its termsin order to uphold wills executed without proper acknowledgement or wilnc.s.s signatures. Asthe court in Estate ofMcCahe (1990) 224 Cal.App.3d 330, 334, explained, where the"opportunity for fraud is minimal[,]... strict compliance with the statutory requirements inorder to remove that opportunity was unnecessary."

49. Given the circumstances under which the March 2014 Beneficiary Designationwas signed, the opportunity for fraud in this matter was minimal. The notary public'sacknowledgement of the March 2014 Beneficiary Designation stated that Mr. Duranpersonally appeared before her and acknowledged that he was signing in his individualcapacity. The notary public acknowledged Mr. Duran's signature under penalty of perjury inaccordance with her official duty as a notary. She is entitled to a presumption underEvidence Code section 664 that her official duty was regularly performed. RespondentJessica and Mr. Crane observed Mr. Duran's signing the March 2014 BeneficiaryDesignation. Their testimony was credible. Respondents Chase and Chane did not subpoenathe notary public to testify or offer any other evidence to prove that the mark on the March2014 Beneficiary Designation was not made by Mr. Duran of his own free will.Consequently, respondents Chase and Chane failed to establish that the March 2014Beneficiary Designation was not properly executed by Mr. Duran.

50. When all the evidence offered at hearing and all the arguments of the partiesare considered, respondents Chase and Chane did not submit adequate evidence or argumentsto overturn CalPERS' determination that respondent Jessica was the proper beneficiary ofMr. Duran's Option 1 Balance Benefit under the March 2014 Beneficiary Designation.CalPERS' determination that respondent Jessica was entitled to the Option 1 Balance Benefitand Prorated Allowance Payment must therefore be sustained.

LEGAL CONCLUSIONS

1. By virtue of his employment, Mr. Duran was a state safely member ofCalPERS.

2. Government Code section 21490, in relevant part, provides:

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(a) Except as provided in subdivision (b), a member may at anytime, including, but not limited to, at any time after reachingretirement age, designate a beneficiary to receive the benefits asmay be payable to his or her beneficiary or estate under thispart, by a writing filed with the board.

m... m

(c) The designation, subject to conditions imposed by boardrule, may be by class, in which ca.se the members of the class atthe lime of the member's death shall be entitled as beneficiaries.

The designation shall also be subject to the board'sconclusive determination, upon evidence satisfactory to it, ofthe existence, identity or other facts relating to entitlementof any person designated as beneficiary, and payment madeby this system in reliance on any determination made in goodfaith, notwithstanding that it may not have discovered abeneficiary otherwise entitled to share in the benefit, shallconstitute a complete discharge and release of this system forfurther liability for the benefit.

(Bolding added.)

3. Government Code section 21506, in relevant part, provides:

Any monthly allowance payable to a person, that had accruedand remained unpaid at the time of his or her death, or anyuncashed warrant issued prior to the date of death of the personthat has been returned to this system,... shall be paid in thefollowing order:

(a) In the event of the death of a retired person, to one of thefollowing:

(1) The beneficiary entitled to payment in accordance with anoptional settlement chosen by the member.

4. CalPERS determined that respondent Jessica was the proper beneficiary of Mr.Duran's Option 1 Balance Benefit under the March 2014 Beneficiary Designation. It waswithin CalPERS' authority to make this determination under Government Code section21490. Respondents Chase and Chane did not submit sufficient evidence to establish thatCalPERS' determination should be overturned. Consequently, their appeals must be denied.

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ORDER

The appeals of respondents Chase and Chane Billow are DENIED. RespondentJessica Crane shall receive the lump sum Option 1 Balance of Contributions Benefit andProrated Allowance Payment from the death of her uncle, David Duran.

DATED: October 4,2016

OocuSiijneU by:

SCMe770E030a4DC..

KAREN J. BRANDT

Administrative Law JudgeOffice of Administrative Hearings

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